The appointment of Raghuram Rajan, a Chicago economics professor, to the helm of the Reserve Bank of India is certainly an intriguing one. His arrival comes at a time when the Indian economy stands at the threshold of an outright foreign exchange crisis, more serious than anything seen since Manmohan Singh’s economic reforms of the early 1990s. Mr Singh is now Prime Minister, and seems to have lost his magic touch.
As Rajan himself has commented, central bankers can move from hero to zero in very short order, and so too can entire economies. India’s economy was generally deemed to be a startling success as little as two years ago. Now it is seen more like an old-fashioned emerging market, with severe supply side failures combined with unsustainable fiscal and balance of payments deficits. Read more